Why review your life insurance policy annually?
If you’ve already purchased life insurance, you’ve taken a big step toward securing your financial future.
Now, you need to make sure that your life insurance keeps up with your life. Don’t set it and forget it – changes in your career or family can affect how much you need and where you want it to go.
Life insurance is simple to maintain, but a life insurance annual review can help make sure you’re protecting everything you should. Here’s what to consider during your annual life insurance policy review.
Why conduct an annual review of your life insurance policy?
Life insurance is meant to stay with you for the long haul. Term life insurance typically lasts anywhere from 10 to 30 years, and permanent life insurance coverage lasts your whole lifetime. A lot can happen in between. For example, you might buy a 30-year term life insurance plan as a young newlywed. Thirty years later, you’re a grandparent and approaching retirement.
Life insurance needs to provide your family with enough financial protection to cover their expenses and goals in the years ahead, from daily expenses to paying the mortgage to saving for college. Once you choose a life insurance product, reviewing it regularly can help make sure that your needs are covered. Changes might be in order if:
- Your family grows. The birth or adoption of a child usually leads to bigger life insurance coverage needs. If you want to increase your life insurance coverage, you may need to reapply. Since life insurance rates go up as you get older, you may end up paying higher premiums. In some cases, it can be more cost-effective to buy a second policy to supplement your existing one. This is called “life insurance laddering,” and can help you save on coverage by keeping your lower rate on your existing policy.
- You get married or divorced. Getting married means another person is depending on you, so you might want to increase your coverage to make sure they’re protected financially if something happens to you. You’ll also likely want to update your beneficiary designation to name your partner. If you get divorced, make sure to update your beneficiary selection if your policy allows you to do so. Life insurance is legally binding, so the payout may still go to your ex if they’re listed.
- Your income grows. Get a new job or promotion at work? This means that your family is depending on more income, and it may be time to buy more life insurance coverage.
- Your health improves. Once you buy coverage, you’re guaranteed that coverage for the life of the policy, regardless of changes in your health. But if your health improves, it might be worth a second look at your life insurance coverage. For example, if you quit smoking and you’ve been nicotine-free for over a year, then your smoker life insurance rates can typically switch over to non-smoker insurance rates, potentially lowering your premiums. You might also qualify for lower premiums if you’ve lost weight and kept it off for at least a year. You can also get a better health class and lower insurance rates if you have improvements in your blood pressure or cholesterol readings. Talk to your life insurance agent about your current health and how it might affect your coverage.
Making changes to your plan
Ready for a refresh of your policy? When you review your life insurance coverage, some of the main areas to consider include:
- Your coverage amount. You can look at increasing your life insurance policy or possibly adding a new life insurance policy by laddering policies. If you need less coverage, it might make sense in some cases to decrease your life insurance coverage. That said, make sure not to leave your family unprotected later in case of unexpected needs. Talk to your insurer about adjusting your coverage amount and how it might affect your rates.
- Your beneficiary. Review your beneficiary designations regularly to make sure the right people are listed on your life insurance policy. If you need to make a change, you’ll just need to complete a simple form from your life insurance company in most cases.
- Your personal information. Make sure that all of your banking info and your address is up to date and that your payment preferences still make sense, whether you’re paying your premiums monthly or annually.
Still have questions or want more information about a life insurance policy review?
We’re here to help. eFinancial works with top-rated life insurance companies to help you find the right coverage for you and your family. Call us or start your quote online today.
At eFinancial, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed and updated regularly to ensure the information is as relevant as possible.